The World Bank on Monday revealed that Nigeria spent $9.6 billion in 12 years, from 2010 to 2021, to service its foreign debts, noting that the country’s debt stock is not represented in the economy.
This information was made public by the World Bank in its International Debt Report, which revealed that Nigeria’s foreign loans had skyrocketed by 305% over the preceding 12 years.
The paper claims that Nigeria’s external debt stock increased from $18.39 billion in 2010 to $76.21 billion in 2021. Nigeria owed $103 billion in foreign debt as of the first half of 2022.
Likewise, from $59.3 million in 2010 to $1.73 billion in 2021, the annual interest paid on external debt increased substantially by 2,819%.
The World Bank defines the external debt as debt owed to nonresidents and repayable in money, goods, or services. It is the total of all long-term, short-term, and IMF credit that is public, publicly guaranteed, private, and privately nonguaranteed.
The research also revealed that Nigeria’s external debt principal repayments totaled $30.66 billion during the course of the previous 12 years, with yearly principle repayment increasing by 469 percent to $6.77 million in 2021 from $1.189 million in 2010.
The World Bank analysis revealed that Nigeria’s debt ratios worsened as a result of the high increase in the external debt stock and interest payments, with the external debt stock to export increasing to 144.4% in 2021 from 22.5% in 2010. Similarly, from 1.5% in 2010 to 16.5% in 2021, the country’s external debt service to export ratio worsened.
The World Bank asserts that dangers associated with debt are increasing for Nigeria and other developing nations, warning that slower global development and rising interest rates pose a threat to tip many nations into debt crises. The majority of the world’s poorest nations—60%—are either already in financial difficulty or are at significant danger of it.
The country director for Nigeria for the World Bank, Shubham Chaudhuri, stated that the country’s economy does not accurately represent the high level of debt stock and that the World Bank is concerned that the cost of debt servicing is higher than the country’s income.
The high cost of debt service is not sustainable, according to the lead economist for Nigeria at the World Bank, Alex Sienaert, who also noted that the nation now relies on borrowing more than ever before.
Chaudhuri stated during a roundtable discussion with media executives in Lagos that, “Nigeria has huge potential and often you can see it from the impact of the Nigerians in Diaspora and the rest of the world as well as the potential you see within Nigeria right now.
“But Nigeria has huge challenges. The basic thing, that is as little as investing in its people, Nigeria has not done a lot in that regard and in terms of enabling private firms to grow and create jobs, that hasn’t happened and without those two things, Nigeria would never get out of the situation it finds itself presently.
“Essentially, if you look at from the 1980s down to 2020, average income hasn’t really grown. Take Indonesia which is very similar to Nigeria, you will see the difference. Both countries had similar average income in the eighties. Good times come with oil prices being high. Nigeria is at a critical juncture and there are three different paths that Nigeria can take.
“The most likely path is what we call business as usual. But why are we sounding the alarm? For the first time in Nigeria’s history, what should be good times has actually become negative for the country.
“Oil prices have headed up, while oil and gas revenue has headed down. Petrol subsidy is not really helping the poor and should be taken away. Another reason why things are different this time for Nigeria is that for the first time, the cost of debt service has exceeded its revenue.
“Another thing is that when oil prices go up, Nigeria’s current account balance goes up and usually forex reserves go up. But for the first time, just as we saw with revenue, forex reserves have continued to decline. So, the question is, where are all those borrowings going to?”
